House of Commons Transport Committee Competition in the local bus market Third Report of Session 2012–13 Volume I: Report, together with formal minutes, oral and written evidence Additional written evidence is contained in Volume II, available on the Committee website at www.parliament.uk/transcom Ordered by the House of Commons to be printed 4 September 2012 HC 10 (Incorporating HC 1861-i to iii, Session 2010-12) Published on 13 September 2012 by authority of the House of Commons London: The Stationery Office Limited £20.00 The Transport Committee The Transport Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department for Transport and its Associate Public Bodies. Current membership Mrs Louise Ellman (Labour/Co-operative, Liverpool Riverside) (Chair) Steve Baker (Conservative, Wycombe) Jim Dobbin (Labour/Co-operative, Heywood and Middleton) Mr Tom Harris (Labour, Glasgow South) Julie Hilling (Labour, Bolton West) Kwasi Kwarteng (Conservative, Spelthorne) Mr John Leech (Liberal Democrat, Manchester Withington) Paul Maynard (Conservative, Blackpool North and Cleveleys) Iain Stewart (Conservative, Milton Keynes South) Graham Stringer (Labour, Blackley and Broughton) Julian Sturdy (Conservative, York Outer) The following were also members of the committee during the Parliament. Angie Bray (Conservative, Ealing Central and Acton) Lilian Greenwood (Labour, Nottingham South) Kelvin Hopkins (Labour, Luton North) Gavin Shuker (Labour/Co-operative, Luton South) Angela Smith (Labour, Penistone and Stocksbridge) Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the internet via www.parliament.uk. Publication The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at http://www.parliament.uk/transcom. A list of Reports of the Committee in the present Parliament is at the back of this volume. The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume. Additional written evidence may be published on the internet only. Committee staff The current staff of the Committee are Mark Egan (Clerk), Farrah Bhatti (Second Clerk), David G Davies (Senior Committee Specialist), Tony Catinella (Senior Committee Assistant), Adrian Hitchins (Committee Assistant), Stewart McIlvenna (Committee Support Assistant) and Hannah Pearce (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Transport Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 6263; the Committee’s email address is [email protected] 1 Contents Report Page Summary 3 1 Introduction 5 The importance of bus services 5 Provision of bus services 5 London 6 Passenger numbers 6 Passenger satisfaction 7 Government bus strategy 8 Government spending on buses 9 Reference by the Office of Fair Trading 10 Our inquiry process 11 2 Competition–is more always better? 12 Competition Commission report–key findings 12 Geographic market segregation 12 Lack of head-to-head competition 13 Excess profits 13 Proposed remedies 14 Reactions from stakeholders 15 Passengers 15 Local authorities 16 Bus operators 16 Detriment 17 Trades Unions 18 Government response 18 Conclusions 19 3 The franchise option 20 Competition Commission’s analysis of the bus franchise option 20 Does London point the way? 21 The franchise option–some pros and cons 22 Quality Contract provisions 24 Difficulties of being first local authority “across the line” 25 4 Partnerships 26 Non-statutory bus partnerships 26 Statutory partnership options 26 Government policy on partnerships and funding reform 27 Competition Commission and quality partnerships 28 Ingredients for successful partnerships 28 Multi-operator tickets 29 Supported services 29 2 5 Monitoring and enforcement of standards 31 Ensuring safety and punctuality 31 Traffic Commissioners 31 A comparison with rail regulation 32 Leadership by the bus industry 33 6 Conclusion 34 Conclusions and recommendations 36 Annex: Bus passenger statistics 39 Formal Minutes 40 Witnesses 41 List of printed written evidence 41 List of additional written evidence 42 List of Reports from the Committee during the current Parliament 44 3 Summary Over five billion passenger journeys are made by bus each year in Great Britain, journeys that are important to individuals and to businesses. Outside London, three-quarters of bus services are planned and provided commercially by private bus companies. Additionally, local and central government spend over £2.5 billion in England alone on support for bus services and concessionary travel. While many services are good, not all are as good as they could or should be and bus use outside London continues to decline. Quality varies across areas and across bus operator groups. In our previous report, Bus Services after the Spending Review, we highlighted the danger that bus services would be disproportionately affected by the spending cuts. The Competition Commission undertook a major investigation into the operation of local bus markets and estimated that a lack of competition was imposing up to £305 million of detriment on passengers and local authorities. It proposed remedies to increase head-to- head (on the road) competition, which it believes will lead to improved services for passengers. The Government has agreed to implement most of the remedies. Many witnesses to our inquiry argued that widespread head-to-head competition was neither sustainable nor desirable. There was general support for the individual remedies proposed by the Competition Commission, particularly for more multi-operator ticketing schemes, but a view that these measures alone were not sufficient. We support the Competition Commission’s remedies but are not convinced that it has addressed the full range of issues, including the problem of large incumbent operators who do not provide a sufficiently good service. The Local Government Association (LGA) and some passenger transport executives (PTEs) argued for more emphasis on franchising, using the Quality Contract provisions of the Local Transport Acts. The LGA also argued for more government bus spending to be put under local authority control. Bus operators and some passenger groups were wary of these proposals. We concluded that although only a few PTEs seem likely to adopt the franchise route, it is important that this option is seen to be realistic. The Government should be even-handed in its approach to support for partnerships and franchises. The key issue will be whether franchises can deliver better value for money. London delivers a superior bus service, under a form of franchising, but in very different circumstances and with a much greater level of subsidy. Changes to the Local Transport Act 2008 are not required. Partnerships–between local authorities and bus operators–will be the way forward in most areas. Where possible, partnerships will include multiple operators, as in Oxford, and competition will take place within a framework that benefits the public. Multi-operator ticketing schemes and smartcards should be implemented more widely. In areas with only one operator, partnerships should still be pursued. We call on local authorities and the bus industry to show leadership in developing partnerships, the best of which are based on shared interests and long-term-relationships and cannot easily be imposed. We also call on the Government to ensure that partnerships, including measures such as joint ticketing and co-ordinated timetabling, can proceed without undue constraint from the competition 4 authorities, where partnerships are in the interests of passengers. Bus operators have to comply with safety regulations and punctuality standards, enforced by the Traffic Commissioners, but there is little other regulation of service quality for commercial services. We were concerned that limited resources were preventing the Traffic Commissioners from carrying out their regulatory functions as robustly as they would wish. The resourcing of bus regulation seems to compare unfavourably with that for rail. We recommend that that the Department for Transport commission an independent review of the resources for the Traffic Commissioners in time for the next Spending Review. In conclusion, we call on the Government to establish a framework that will encourage and enable local authorities and bus operators to work towards providing better bus services. 5 1 Introduction The importance of bus services 1. Over five billion passenger journeys were made by bus in Great Britain in 2010-11, more than three times the number of journeys by national rail.1 People use buses for a range of journey purposes, mainly for shopping, commuting, leisure and education.2 Younger people, older people3 and those without access to a car are most reliant on buses.4 Norman Baker MP, Parliamentary Under-Secretary of State for Transport with responsibility for buses, described buses as “a lifeline for people who do not have access to a car.”5 Buses are also important for economic purposes, providing access for people to jobs and for firms to labour markets.6 During our previous inquiry, Bus Services after the Spending Review,7 we heard directly from bus users